Specifics of the Microsoft-Yahoo search deal

The search deal announced by Microsoft and Yahoo this morning finally ends a two-year courtship between the two companies, whose marriage will position the consortium firmly closer their mutual target: Google.

That’s because, joined together, Microsoft and Yahoo account for 28 percent of the search-engine market – still far behind Google’s 65 percent but much farther ahead than they were on their own. Those numbers are according to the latest comScore report.

Here are the specifics of the deal:

The agreement term is 10 years.

Microsoft will get an exclusive 10-year license to Yahoo’s search technology.

Microsoft can integrate Yahoo search technology into Bing.

Bing will handle all search on Yahoo sites.

Yahoo will handle sales for both companies’ premium search advertisers.

Smaller, self-serve advertisers will use the Microsoft AdCenter service.

Display advertising sales will continue individually.

Yahoo’s search will remain branded by Yahoo.

Yahoo will receive 88 percent of revenue from search ads on its site, for the first five years of the agreement.

Yahoo will continue its existing search partnerships.

Data exchanged between the two companies will be limited, to protect user privacy.

Microsoft did not give Yahoo any up-front payment – money will be handled by the companies’ revenue-sharing agreement.

Yahoo said the deal will add $500 million to its operating income and save the company $200 million each year. The Sunnyvale, Calif.- based company also expects $275 million more in annual operating cash flow.

As of 10:15 a.m. Pacific time, Yahoo’s stock had dropped 11 percent since the markets opened this morning, to $15.33. Microsoft’s stock remained steady, increasing 0.2 percent to $23.52, as of 10:15 a.m.

The deal will be reviewed by government regulators, and the companies hope that process will be closed by early 2010. At that point, the terms of the deal will be implemented over the next 24 months, the companies said.